Albice v. Premier Mortgage Services of Washington, Inc.

8/8/2019 Albice v. Premier Mortgage Services of Washington, Inc.

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II

CHRISTA L. ALBICE, a married woman, and

BART A. TECCA and KAREN L. TECCA,

husband and wife,

No. 39265-8-II

Appellants,

v.

PREMIER MORTGAGE SERVICES OF

WASHINGTON, INC., a WashingtonCorporation; OPTION ONE MORTGAGE

CORPORATION, a California Corporation;

PUBLISHED OPINION

Defendants,

RON DICKINSON and JANE DOE

DICKINSON, husband and wife,

Respondents.

RON DICKINSON,

Respondent,

v.

CHRISTA L. ALBICE f/k/a CHRISTA L.

DEYOUNG; BART A. TECCA and KAREN

L. TECCA, husband and wife; Any Subtenants,

and All Others Acting By or Through Them,

Appellants.

Armstrong, J. Christa Albice and Karen and Bart Tecca (Albice/Teccas) appeal the trial

courts refusal to set aside a nonjudicial deed of trust foreclosure sale of their property. They

argue that (1) the successful bidder at the foreclosure sale was not a bona fide purchaser; (2) even

if he was, the trustees deed failed to report procedural facts that would statutorily protect a


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1 The exact nature of the relationship between Option One and Premier is unclear. The trial court

concluded that Option One was affiliated with Premier. Our reading of the record suggests an

even stronger connection. Lisa Clary, an Option One employee designated as the representative

of Premier in this action, described Premier as Option Ones in-house trust deed service,

handling all of Options Ones foreclosures in Washington State at the relevant time. Clerks

Papers (CP) at 239-56. She explained that Option One monitored Premiers work and that both

corporations accessed all loan information from a shared database. Michael Crockett, a licensed

private investigator, stated that Premier is actually Option One.

buyer; (3) the sale was void for taking place beyond the statutorily limited timeframe; (4) the

Teccas timely tendered funds sufficient to cure the loan default and require the trustee to

discontinue the sale; and (5) the trustee lacked authority to conduct the sale because it had no

corporate officer residing in Washington at the time of the sale. We hold that the sale did not

comply with statutory requirements, that the purchaser was not a bona fide purchaser for value,

that the trustees deed failed to state facts that would protect a buyer, that the sale price was

inadequate, and that the sale was surrounded by other unfair circumstances. Accordingly, we

reverse.

FACTS

A. Background

Christa Albice and Karen and Bart Tecca owned improved real property on Hartstine

Island in Mason County. Sisters Albice and Tecca inherited the 10-acre property from their

parents free of any liens or encumbrances.

In 2003, the Teccas borrowed $115,500 against the property secured by a deed of trust.

The loan was serviced through a subsidiary of H&R Block known as Option One Mortgage

Corporation (Option One). Premier Mortgage Services of Washington (Premier), also a

subsidiary of H&R Block, was the trustee of the deed of trust.1


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2 The sale was continued six times before the final sale took place.

3 According to legal counsel for Option One, a letter was sent to the Teccas on January 31, 2007,

declaring breach of contract for nonpayment under the terms of the forbearance agreement and

notifying them that the foreclosure proceedings would continue without further demand. Karen

Tecca claims she never received written notice that they were in breach of contract.

The Teccas fell delinquent on their loan payments to Option One in April 2006. Premier

issued a Notice of Foreclosure and a Notice of Trustee Sale, informing the Teccas that it would

hold a foreclosure sale on September 8, 2006. The Teccas contacted Option One to find out how

to cure the delinquent payments and avoid foreclosure.

In July 2006, the Teccas and Option One entered into a forbearance agreement. The

agreement stated that the Teccas owed $5,126.97 to bring the loan current. The Teccas agreed to

a down payment of $3,000.00 and increased monthly payments, to be paid by the 16th of every

month, through January 2007. On September 8, 2006, the crier of the sale announced that

Premier was postponing the foreclosure sale.2

The Teccas made the down payment and, although late, made each of the subsequent

monthly payments. The Teccas tendered the final payment, which was due on January 16, on

February 2, 2007. On February 10, 2007, they received notice from Western Union that Option

One had refused to accept their final payment. Western Union refunded the final payment on

February 16, 2007.3

On February 16, 2007, Premier conducted a foreclosure sale of the property, 161 days

after the original sale date set in the Notice of Trustee Sale. Through an agent, Ron Dickinson

successfully bid $130,000 for the property.


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4 The trial court dismissed Albice/Teccas claims against Premier and Option One because of an

arbitration agreement the Teccas signed. The trial court granted the Dickinsons motion to

voluntarily dismiss the cross claims against Premier and Option One.

B. Procedural History

Albice/Teccas sued Premier, Option One, and the Dickinsons, seeking to set aside the

foreclosure sale. They alleged that Option One breached the forbearance agreement with the

Teccas and that Premier breached its fiduciary duty owed to the Teccas and conducted an

improper foreclosure sale. Against the Dickinsons, Albice/Teccas sought to quiet title to the

property. The Dickinsons counterclaimed to quiet title and filed cross-claims against Option One

and Premier.4

The Dickinsons moved for summary judgment to establish that Ron Dickinson was a bona

fide purchaser of the property and therefore entitled to quiet title. Albice/Teccas also moved for

summary judgment, arguing that the foreclosure sale should be set aside as void because (1)

Premier was not a qualified trustee with authority to conduct the sale and (2) the sale occurred

after the statutory deadline. The trial court granted the Dickinsons motion, ruling that Ron

Dickinson was a bona fide purchaser for value. The court held that even though the sale was

continued for more than 120 days in violation of RCW 61.24.040(6), Ron Dickinsons bona fide

purchaser status rendered the deeds recitals of compliance with the statute conclusive evidence

that the sale was proper.

After two rulings on Premiers qualification to act as a trustee in Washington State and

subsequent motions for reconsideration, the parties tried the issue. Following a bench trial, the

court ruled that Premier was eligible to serve as a trustee under Washington law. Accordingly,


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the court quieted title in favor of the Dickinsons and awarded them damages and costs.


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ANALYSIS

I. Washington Deed of Trust Act

The Deeds of Trust Act (Act) sets out the procedures that must be followed to properly

foreclose a debt secured by a deed of trust. Chapter 61.24 RCW. A proper foreclosure action

extinguishes the debt and transfers title to the property to the beneficiary of the deed of trust or to

the successful bidder at a public foreclosure sale. In re Marriage of Kaseburg, 126 Wn. App.

546, 558, 108 P.3d 1278 (2005).

We construe the Act to further three objectives: (1) the nonjudicial foreclosure process

should remain efficient and inexpensive; (2) the process should provide an adequate opportunity

for interested parties to prevent wrongful foreclosure; and (3) the process should promote the

stability of land titles. Cox v. Helenius, 103 Wn.2d 383, 387, 693 P.2d 683 (1985). In addition,

because nonjudicial foreclosures lack the oversight inherent in judicial foreclosures, we strictly

apply and interpret the Act in the borrowers favor. CHD, Inc. v. Boyles, 138 Wn. App. 131,

137, 157 P.3d 415 (2007).

A lawful foreclosure sale must comply with the timing and notice obligations of RCW

61.24.040. For example, a trustee may, for any cause the trustee deems advantageous, continue

the sale for not more than a total of 120 days. RCW 61.24.040(6). And at any time prior to the

11th day before the sale, the borrower is entitled to cure the default set forth in the notice. RCW

61.24.090(1). Upon receipt of such payment, the trustee must discontinue the sale and reinstate

the deed of trust. RCW 61.24.090(3).

To balance the procedural safeguards with the interests of a purchaser, the Act requires a


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5 Albice/Teccas also argue that Premier lacked authority to conduct the foreclosure sale because it

did not qualify as a trustee under the Act without a corporate officer residing in Washington at the

time of the sale. RCW 61.24.010(1)(a). Because we reverse on other grounds, we decline to

address this issue.

6 The Dickinsons contend that Albice/Teccas cannot, for the first time on appeal, argue that they

tendered funds sufficient to cure the default prior to the sale or that the trustees deed containedinsufficient recitals. But both issues were before the court on summary judgment. Albice/Teccas

argued that they tendered the final amount due to the lender 14 days prior to the sale in their

original motion for summary judgment. The Dickinsons argued that Dickinson, as a bona fide

purchaser for value, was entitled to rely on the recitals made by the trustee in the deed. CP at

545. In reviewing summary judgment, we engage in the same inquiry as the trial court. Morin v.

Harrell, 161 Wn.2d 226, 230, 164 P.3d 495 (2007). Whether the recitals in the deed of trust are

sufficient for Dickinson to rely on is a necessary step in deciding whether Dickinson is entitled to

the protection of RCW 61.24.040(7).

foreclosing trustee to issue a deed that recites facts showing that the sale was conducted in

compliance with statutory requirements. RCW 61.24.040(7). A bona fide purchaser is entitled to

rely on these recitals as to the correctness of foreclosure sale procedures. RCW 61.24.040(7);

Glidden v. Mun. Auth. of Tacoma, 111 Wn.2d 341, 347, 758 P.2d 487 (1998).

II. Statutory Defects in the Sale

Albice/Teccas argue that the trustees failure to comply with certain statutory

requirements renders the sale void. First, they claim that Premier had no authority to conduct the

sale 161 days after the original sale date under RCW 61.24.040(6). Next, they claim that because

they tendered funds sufficient to cure the default, the trustee should have discontinued the sale

under RCW 61.24.090(3).5 In addition, they assert that the recitals contained in the trustees

deed are inadequate to demonstrate compliance with the statute. Br. of Appellant at 15, 18.

The Dickinsons counter that as bona fide purchasers for value, they are protected by the

recitals in the deed of trust, which serve as conclusive evidence of a procedurally correct sale

under RCW 61.24.040(7).6


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We hold that the conclusional recitals in the deed of trust do not protect the Dickinsons

from undisputed defects in the sale because they do not meet the statutory requirement of facts

showing compliance with chapter 61.24 RCW. In addition, regardless of the sufficiency of the

recitals, we hold that Dickinson was not a bona fide purchaser entitled to protection under RCW

61.24.040(7).

A. Standard of Review

On summary judgment, the trial court ruled that even though the sale was continued for

more than 120 days in violation of RCW 61.24.040(6), Dickinsons bona fide purchaser status

rendered the deeds recitals conclusive evidence that the sale was proper. We review a summary

judgment de novo. Hisle v. Todd Pacific Shipyard Corp., 151 Wn.2d 853, 860, 93 P.3d 108

(2004). Summary judgment is proper when there are no genuine issues of material fact and the

moving party is entitled to judgment as a matter of law. CR 56(c). We consider all facts and

reasonable inferences from them in the light most favorable to the nonmoving party. City of

Lakewood v. Pierce County, 144 Wn.2d 118, 125, 30 P.3d 446 (2001). The trial court can grant

the motion only if, from all the evidence, reasonable persons could reach but one conclusion.

Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982).

B. Sufficiency of Recitals

The trustees deed recites information about the underlying debt obligation, the failure to

cure the default, the lenders request to sell the property, and the fulfillment of notice

requirements prior to the sale. The deed also recites that [a]ll legal requirements and all

provisions of said Deed of Trust have been complied with, as to acts to be performed and notices


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7 In fact, the final payment arguably triggered the statute that requires a trustee to discontinue a

sale where the borrower tenders a cure for the default 11 days before the sale. RCW

61.24.090(3). Even if the Teccas were short the trustees expenses as required by RCW

61.24.090(1)(b), the trustee had a fiduciary duty to notify the Teccas of any additional costs or

fees due after they tendered the last payment under the forbearance agreement more than 11 days

before the scheduled sale. RCW 61.24.090(1)(a), (3).

to be given, as provided in Chapter 61.24 RCW. CP at 450.

Notably absent in the trustees deed is any mention of the six continuances. Although the

original sale date was September 8, 2006, the trustees deed states that the original sale date on

the Notice of Trustee Sale was 02/16/2007 (which was the actual sale date). CP at 444, 450.

Nor does the trustees deed mention the forbearance agreement or any of the make-up payments,

including the tender of the last payment, which although late, would have cured the original

default if accepted. The trustees deed tells none of this story, reciting simply that [a]ll legal

requirements and all provisions of [Chapter 61.24 RCW] have been complied with and that the

original default had not been cured more than 11 days before the final sale.7 CP at 450. These

conclusional recitals make it impossible to determine, as a matter fact, whether the sale took place

within the statutorily required time or whether the borrowers were actually in default at the time

of the sale.

1. Purpose of Recitals

We construe a statute to give effect to the legislatures intent. Udall v. T.D. Escrow

Serv., Inc., 159 Wn.2d 903, 909, 154 P.3d 882 (2007). Where the statutes words are plain and

unambiguous, we apply the statute as written. Enter. Leasing, Inc. v. City of Tacoma, 139

Wn.2d 546, 552, 988 P.2d 961 (1999). We also, when possible, give effect to every word,

clause, and sentence of a statute. Cox, 103 Wn.2d at 387. In the absence of a terms statutory


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definition, we give the term its plain and ordinary meaning ascertained from a standard dictionary.

Am. Contl Ins. Co. v. Steen, 151 Wn.2d 512, 518, 91 P.3d 864 (2004).

The Act requires the foreclosing trustee to issue to the purchaser a deed that:

shall recite the facts showingthat the sale was conducted in compliance with all of

the requirements of this chapter and of the deed of trust, which recital shall be

prima facie evidence of such compliance and conclusive evidence thereof in favor

of bona fide purchasers and encumbrancers for value[.]

RCW 61.24.040(7) (emphasis added). Websters Dictionary defines recital as the formal

statement or setting forth of some relevant matter of fact in a deed or legal document. Websters

Third New Intl Dictionary at 1895 (2002). The statute unambiguously requires the trustee to

recite facts in its deed showing compliance with the requirements of the chapter. Legal

conclusions without supporting facts are insufficient to demonstrate that the sale complied with all

the statutory procedural protections.

The Dickinsons point to the fact that the recitals contained in the trustees deed are

virtually identical to the form deed recommended by the Washington State Bar Association in the

Washington Real Property Deskbook, 3d Ed. (Wash. State Bar Assn. Supp. 2001), 47.11 (16).

The deskbook, however, is not authority we are bound to follow. Had the trustee correctly

identified the original sale date on the Notice of Sale, the deed would have contained inconsistent

recitalsthat the sale was continued for a period exceeding 120 days contrary to, not in

compliance with, the terms of the statute. And had the trustee reported that Option One and the

Teccas had executed a forbearance agreement under which the Teccas had actually paid all or

most of the original delinquency, the recitals would have been, at the very least, seriously

misleading as to whether the original defaulthad been cured.8 California courts have held that


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8Notably, Option Ones alleged letter of January 31 notified the Teccas that the February 16 sale

would take place because they had breached theforbearance agreement, not the original note.

9 Washington State already affords purchasers broader protections than many other states by

providing a conclusive presumption of compliance in favor of bona fide purchasers in all aspects

of foreclosure. Grant Nelson and Dale Whitman, Reforming Foreclosure: The Uniform

Nonjudicial Foreclosure Act, 53 Duke L. J. 1399, 1505 (2004).

where recitals of regularity appear on the face of the deed but the deed also sets forth facts which

are inconsistent with that recital, the deed is void on the basis that the recitals are not valid.

Dimock v. Emerald Props. LLC, 81 Cal. App. 4th 868, 877, 97 Cal. Rprt.2d 255 (2000) (citing

Little v. CFS Serv. Corp., 188 Cal. App. 3d 1354, 1359, 233 Cal. Rptr 923 (1987)). We agree

with this reasoning. We are unwilling to accept a trustees legal conclusions contrary to the

actual facts of the foreclosure process as conclusive evidence where an accurate reporting of the

facts would have shown the legal conclusions to be incorrect.

Moreover, a trustees bald statements that he or she has complied with the law, as

distinguished from recitals of fact demonstrating such compliance, tend to dilute the statutory

protections afforded borrowers by the Act.9 See Rosenberg v. Smidt, 727 P.2d 778, 786 (Alaska

1986). While the purpose of RCW 61.24.040(7) is to enhance the reliability of land titles,

conclusional recitals do so at the borrowers expense. A conclusional recital in a trustees deed

requires little effort or oversight by the trustee yet it severely limits a borrowers ability to obtain

post-sale relief. Rosenberg, 727 P.2d at 786 (noting that although factual recitals do not always

protect against fraud, they tend to prevent more common failings of oversight and neglect). In

contrast, requiring the trustee to recite the statutorily mandated facts of the loan-default

procedure strikes the appropriate balance between the competing interests of all the parties.

Where, as here, the deed contains legal conclusions but not factual recitals that establish


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compliance with RCW 61.24.040(7), we decline to extend protection to a purchaser beyond what

the legislature clearly intended. We emphasize that the problem here is not that the recitals are

wrong or misleading; rather, it is the trustees failure to recite any facts triggering the protections

afforded by chapter 61.24 RCW. We hold that the Dickinsons are unable to claim the protections

of RCW 61.24.040(7); i.e., that the trustees sale occurred within the statutorily required time and

that the original defaults had not been cured. We next consider whether at least one of these

flaws renders the sale void.

2. Sale Void Beyond 120 Days

The Dickinsons argue that the original sale was suspended subject to the forbearance

agreement between the Teccas and Option One and that this does not violate the statute, which

prohibits a trustee from continuing a sale for more than 120 days. Indeed, the forbearance

agreement contains the following provision:

In the event that a foreclosure action is pending relating to the Loan at the timethis Agreement becomes effective. . .the foreclosure action will not be dismissed,

but the Lender shall use its best efforts to ensure that the foreclosure is placed on

hold pending satisfaction by Borrowers of the terms of this Agreement. Lender

shall retain the right to continually postpone the foreclosure. . .or otherwise take

any action reasonably necessary to maintain the pending status of the foreclosure

action during the term of this Agreement.

CP at 467. Each time the sale was continued, the crier of the sale attributed the postponement to

a mutual agreement. CP at 358-59.

RCW 61.24.040(6) grants a trustee authority to continue a sale for any cause the trustee

deems advantageous. Wells Fargo Bank Minnesota v. Vincent, 124 Wn. App. 1, 3-4, 93 P.3d

173 (2004). In Vincent, the court reasoned that the statutes plain language renders immaterial a


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10 The forbearance agreement appears to permit indefinite continuances. See CP at 467 (Lender

shall retain the right to continually postpone the foreclosure . . .). But a contract that conflicts

with statutory requirements is unenforceable as a matter of law. Pierce County v. State, 144 Wn.

App. 783, 841, 185 P.3d 594 (2008). Regardless of the terms in the agreement, Premier did not

have the authority to continue the sale beyond the 120-day statutory limit.

trustees reliance on mutual agreement when postponing a sale. Vincent, 124 Wn. App. at 4

n.5. There, the court held that absent an agreement to the contrary, the terms of the statute

granted the trustee authority to continue the sale. Vincent, 124 Wn. App. at 3-4. Here, the

Teccas did not contest Premiers or Option Ones ability to continue the sale. Following Vincent,

without an agreement restricting continuances of the sale, the grounds for continuing the sale

were immaterial under the trustees statutory authority.10 We next consider whether the 120-day

limit in RCW 61.24.040(6) divests a trustee of all authority to sell the property such that a sale

after the 120 days is void.

A plain reading of the statute unambiguously limits what is otherwise unfettered discretion

of the trustee to continue a sale. RCW 61.24.040(6) (trustee may continue the sale for a period

or periods not exceeding a total of one hundred twenty days) (emphasis added). Thus, one

factor courts address in determining the validity of a sale is whether the sale occurred within 120

days. In Felton v. Citizens Federal Savings and Loan Association of Seattle, 101 Wn.2d 416,

424-25, 679 P.2d 928 (1984), although the trustee sale occurred more than three months after it

was originally scheduled, in breach of an agreement, the court upheld the validity of the sale

because the borrowers requested the delay and the sale occurred within the 120 days allowed by

RCW 61.24.040(6). See also In re Bell, 386 B.R. 282, 289 (2008) (holding that a trustee sale

postponed by oral notice complied with the Act where it was continued by public proclamation

for less than a total of 120 days). Conversely, inBingham v. Lechner, 111 Wn. App. 118, 131,


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11 Because this procedural flaw renders the sale void, we need not consider whether it is also void

because the trustee failed to set forth facts in the deed showing the true status of the Teccas

default, if any.

45 P.3d 562 (2002), the court addressed the effect of exceeding the 120-day limit. There, the

trustee argued that the statute of limitations on enforcing payment of a loan did not bar him from

reinstituting foreclosure proceedings. Bingham, 111 Wn. App. at 127-28. He claimed that the

statute of limitations tolled, and never restarted, when the original foreclosure proceedings were

initiated. Bingham, 111 Wn. App. at 127. The court, relying on RCW 61.24.040(6), held that

the trustee was entitled to continue the initial sale for 120 days, during which time the statute of

limitations tolled. Bingham, 111 Wn. App. at 131. But the court concluded that after 120 days,

the trustees right to conduct the original sale extinguished, restarting the statute of limitations.

Bingham, 111 Wn. App. at 131. We agree that this provision divests a trustee of authority to

conduct a sale more than 120 days from the date in the Notice of Sale.

In the absence of specific facts in the trustees deed showing that the trustee held the sale

within 120 days, including continuances, RCW 61.24.040(7) does not protect Dickinson from a

showing to the contrary. The trustee held the sale 161 days after the date set forth in the Notice

of Trustee Sale, well beyond the statutorily mandated 120-day limit. Accordingly, the sale was

void.11

C. Bona Fide Purchaser Status

Even if the recitals were sufficient, Dickinson is unable to rely on the protection of RCW

61.24.040(7) because he was not a bona fide purchaser for value. Without such protections, the

undisputed statutory defects in the sale, as demonstrated above, render the sale void.

Albice/Teccas argue that Dickinson was not a bona fide purchaser because (1) he knew or


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should have known about the defects in the sale and (2) the purchase price was substantially

below the propertys fair market value. Specifically, they argue the following circumstances gave

Dickinson notice of flaws in the foreclosure proceedings: (1) Dickinson was intimately familiar

with real estate investment and the non-judicial foreclosure process; (2) from experience,

Dickinson knew foreclosure sales are usually continued for 30 days; (3) Dickinson spoke with

Karen Tecca, who told him that they had no interest in selling, that the sale was not going to

happen, and that they were going to make up the payments; and (4) Dickinson was surprised

when the property came up for sale. Br. of Appellant at 19-20. Albice/Teccas further argue that

a reasonably diligent inquiry would have revealed that the Teccas had entered into a forbearance

agreement under which they had made all their payments and that the sale had been continued for

a period beyond what was statutorily allowed.

The Dickinsons counter that postponing the sale beyond 120 days did not put Dickinson

on notice of any procedural defects. They claim that Dickinson did not know, nor should he be

expected to know, about the 120-day statutory limit on continuances. They also argue that

Dickinsons conversation with Karen Tecca produced no information creating actual or

constructive notice of defects in the sale process and that Tecca merely declined an offer to

purchase the property.

A bona fide purchaser is one who purchases property without actual or constructive

knowledge of competing interests and pays the vendor valuable consideration. Glidden, 111

Wn.2d at 350; Glaser v. Holdorf, 56 Wn.2d 204, 209, 352 P.2d 212 (1960). A purchaser is on

notice if he has knowledge of facts sufficient to put an ordinarily prudent man on inquiry and a


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reasonably diligent inquiry would lead to the discovery of title or sale defects. Steward v. Good,

51 Wn. App. 509, 513, 754 P.2d 150 (1988) (citingPeterson v. Weist, 48 Wash. 339, 341, 93 P.

519 (1908)). We must therefore determine whether the events surrounding the sale created a

duty on Dickinsons part to inquire into possible flaws in the foreclosure process. See Glidden,

111 Wn.2d at 350-51. A combination of factors convinces us that Dickinson had a duty to further

investigate the circumstances of the sale.

We give substantial weight to a purchasers real estate investment experience when

determining whether a purchaser had inquiry notice. Compare Steward, 51 Wn. App. at 513

(noting that the bona fide purchasers had little real estate investing experience at the time of the

sale) and Miebach v. Colasurdo, 102 Wn.2d 170, 176, 685 P.2d 1074 (1984) (holding that the

purchaser with 23 years of investment experience was not a bona fide purchaser). Dickinson is in

the business of investing in real estate. Of his 13 properties in Washington, he purchased the

majority through nonjudicial foreclosure sales. By the time of the sale at issue, Dickinson had

attended over 35 foreclosure sales. He stated that he had familiarized himself with various

Washington foreclosure laws as a necessity for conducting his business. Thus, even without

specific knowledge of statutory requirements for a proper sale, Dickinsons familiarity with the

foreclosure process provides context for assessing whether certain facts put him on notice.

Before the actual sale, Dickinson approached Karen Tecca and asked if she was interested

in selling him the property directly. According to Dickinson, Tecca responded that she was not

interested in selling the property and never would be. In light of this conversation, Dickinson

claimed that he was surprised when the property came up for auction. Moreover, on the original


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12 Albice/Teccas expert witness, a certified general appraiser in Washington State, testified that

the property was worth $950,000 in February 2007. Karen Tecca stated in her declaration that

the property had a value in excess of $750,000. Her estimate was based on a 2003 appraisal ofthe property at $607,000, assuming that it had substantially appreciated. In their brief, the

Dickinsons argue that fair market value of the property was approximately $428,000. Based on

this record, the purchase price was between 13-18 percent of its fair market value. In considering

the bona fide purchaser issue, the disparity between what Dickinson paid and the true value of the

property strongly supports our conclusion that Dickinson should have further investigated the

sale. See Restatement (Third) of Property: Mortgages 8.3 cmt. b (1997) (a court is generally

warranted in invalidating a sale where the price is less than 20 percent of fair market value).

sale date, Dickinson learned that the sale was being continued; he obviously tracked the

continuances through to the actual sale 161 days later. In Miebach, 102 Wn.2d at 176-77, the

purchaser drove by the sale property twice and once knocked on the door, noticing a permit for

improvements on the door. The court found these circumstances, coupled with an inadequate

purchase price, sufficient to alert a prudent purchaser of the need to further investigate the sale.

Miebach, 102 Wn.2d at 176-77. Dickinsons personal encounter with Karen Tecca should have

similarly raised his suspicions regarding the circumstances of the foreclosure. That he was

surprised when the property came up for auction reinforces our conclusion that Dickinson had a

duty to confirm the status of the default.

Here too, the sale price was markedly low in comparison to the Albice/Teccas substantial

equity in the property.12 A sale price less than the fair market value at a foreclosure proceeding is

not an irregularity. See BFP v. Resolution Trust Corp., 511 U.S. 531, 538-39, 114 S. Ct. 1757,

128 L. Ed. 2d 556 (1994). But an inadequate purchase price can be a factor that puts a purchaser

on notice of another partys claim of right to, or equity in, the property. See Casa del Rey v.

Hart, 110 Wn.2d 65, 72, 750 P.2d 261 (1988); Miebach, 102 Wn.2d at 176-77. The low auction

price relative to the fair market value should have alerted Dickinson to the discrepancy between


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13 And $450,000 was probably already a significant underestimation of the propertys fair market

value. Purchasers reasonably anticipate lower prices at a foreclosure sale because properties sold

at a foreclosure auction are simply worth less. Resolution Trust Corp., 511 U.S. at 539.

the underlying debt obligation and the Albice/Teccas remaining equity in the property. That

Dickinson evaluated the property at less than the Teccas estimation does not relieve him of

noting this considerable discrepancy. Dickinsons agent was authorized to spend up to $450,000

at the sale, yet he spent only $130,000.13 Like the purchaser in Meibach, Dickinson was aware

that he was paying only a fraction of the propertys value. Thus, the low price was another factor

that should have raised Dickinsons suspicions as a prudent investor.

Together, these facts created a duty on Dickinsons part to inquire into the legitimacy of

the sale. A reasonably prudent real estate investor concerned with protecting his assets would

have inquired into the particulars of the Teccas default, especially with the knowledge that they

had no intention of relinquishing their property. The long delay should have further alerted him

that the Teccas were likely trying to cure the default on their loan and prevent a foreclosure.

When Dickinson contacted the trustee to confirm the date of the sale, he could have easily also

confirmed the circumstances of the default. As in Meibach, 120 Wn.2d at 177, Dickinsons

conduct does not match that of an ordinary prudent investor.

Once on inquiry notice, it is clear that Dickinson would have discovered serious defects in

the foreclosure sale process. With reasonably diligent inquiry, he could have learned that the six

continuances were a result of the Teccas payments under a forbearance agreement and that they

attempted to cure their default more than 11 days prior to the actual sale date. Accordingly, we

hold that Dickinson is not a bona fide purchaser protected under RCW 61.24.040(7). Rather, he

is bound by Albice/Teccas uncontroverted evidence that the sale was conducted in violation of


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the Act.


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III. Sale Void on Equitable Grounds

In addition, Albice/Teccas argue that the substantially inadequate sale price, in conjunction

with unfair circumstances surrounding the sale, establishes equitable grounds to set aside the

foreclosure sale.

Washington courts have not set a benchmark for when a foreclosure sale price is

inadequate as a matter of law. In general, Washington courts have found the purchase price

inadequate when it is less than 10 percent of the fair market value. See e.g., Miebach, 102 Wn.2d

at 177-79 (sale for less than 2 percent of the fair market value was a grossly inadequate sales

price); Cox, 103 Wn.2d at 387-88 (purchase price between 3.9 and 5.9 percent of the fair market

value was grossly inadequate); Casa del Rey, 110 Wn.2d at 72 (purchase for 4.9 percent of the

fair market value was inadequate). The Restatement (Third) of Property states that a court is

generally warranted in invalidating a sale where the price is less than 20 percent of fair market

value. Restatement (Third) of Property: Mortgages 8.3 cmt. b (1997). As noted above,

Dickinson purchased the property for between 13 and 18 percent of its fair market value.

Inadequacy of price alone, however, is generally insufficient to set aside a nonjudicial

foreclosure sale. Udall, 159 Wn.2d at 914-15. But a grossly inadequate purchase price together

with circumstances of other unfair procedures may provide equitable grounds to set aside a sale.

Udall, 159 Wn.2d at 914. Where violations of a sale are technical, a borrower must show that the

circumstances surrounding the sale unfairly harmed or prejudiced the borrower. Steward, 51 Wn.

App. at 515.

According to Albice/Teccas, the string of continuances chilled the bidding process,


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14 To set aside a sale on the grounds of chilled bidding, the challenger to a sale must establish that

bidding was actually suppressed with affirmative, factual evidence. Country Express Stores, 87

Wn. App. at 749. Albice/Teccas do not argue that the sale should be set aside on these grounds

alone; rather, the chilled bidding is an additional unfair circumstance in support of setting aside the

sale on the grounds of inadequate price. In this case, they need not prove actual suppression.

contributing to the substantially low sale price. At the initial sale, four or five bidders appeared;

only two bidders appeared at the actual sale 161 days later. The crier of the sale commented that

the sale was continued so many times that nobody thought it was going to happen. And the

actual sale, originally scheduled for 10:00 a.m., was not held until 11:45 a.m. A trustees actions

that effectively suppress competitive bidding need not be intentional to warrant relief. See

Country Express Stores, Inc. v. Sims, 87 Wn. App. 741, 748-49, 943 P.2d 374 (1997). Here, the

trustees continuances and delayed start of the actual bidding likely chilled the bidding process by

reducing the number of potential bidders.14 Dickinson paid only a fraction of the amount he was

prepared to pay, suggesting he would have paid more had the bidding been competitive.

More importantly, circumstances surrounding the default and the Teccas attempts to save

their substantial equity in the property constitute unfair circumstances warranting the setting aside

of the sale on equitable grounds. In Cox, 103 Wn.2d at 386, the trustee conducted the sale even

though he had actual notice of a pending action where the borrowers were challenging their

underlying debt obligation. The court reasoned that given his fiduciary duties to both the

borrower and the lender, the trustee should have informed the borrowers attorney that she had

failed to properly restrain the sale until resolution of the underlying dispute. Cox, 103 Wn.2d at

390. The court held that the trustees action, along with the inadequate purchase price, resulted

in grounds to set aside the sale. Cox, 103 Wn.2d at 388.


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15 In addition to paying the default amount, the Teccas also needed to pay the expenses and costs

incurred by the trustee. RCW 61.24.090(1)(b).

16

Under the forbearance agreement, the Teccas contracted to pay Option One. But it would bedisingenuous to suggest that payment to Option One did not put Premier on notice of the Teccas

attempt to cure the default. As noted above, Premier and Option One are closely affiliated,

sharing access to the same loan information, including foreclosure payments. Lisa Clary, an

Option One employee designated as Premiers representative in this action, stated that she knew

the Teccas final payment under the agreement was tendered late and rejected. Moreover, the

signatory of the Deed of Trust, Kim Thorne, was employed by Option One. Thus, Premier was

on notice, either actual or constructive, that the Teccas tendered their final payment under the

forbearance agreement.

Here, the Teccas tendered the final payment under the forbearance agreement on February

2, 2008, more than 11 days before the sale on February 16, 2008. Although this amount may not

have been sufficient to automatically discontinue the sale under

RCW 61.24.090(3),15 it was sufficient to require that Premier, as a fiduciary to both the lender

and Albice/Teccas, cancel the sale, give the Teccas notice of any additional costs due, and

reschedule the sale with additional public notices.16 The harm to the lender would be minimal in

again delaying the sale. The harm to Albice/Teccas in proceeding with the sale was

enormousthe loss of $300,000-$800,000 of equity in the property. A trustee is not required to

obtain the best possible price for the trust property; nonetheless, a trustee must take reasonable

and appropriate steps to avoid sacrificing the debtors interest in the property. Cox, 103 Wn.2d at

389. Here, the trustee acted with complete disregard for the Albice/Teccas substantial interest in

the property. We have no hesitation in holding that under Cox, these circumstances more than

warrant setting aside the nonjudicial foreclosure sale. We vacate the trial courts order approving

the sale and remand for the trial court to enter an order declaring the sale void.


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IV. Attorney Fees

Finally, Albice/Teccas argue that if we find that the trustees sale was void, the judgment

entered for rent, costs, and statutory attorney fees should be reversed. RCW 59.12.170 provides

that the court shall assess damages occasioned by an unlawful detainer. Costs, including statutory

attorney fees, are awarded to a prevailing party pursuant to RCW 4.84.010. Because we have set

aside the sale as void, we also reverse the trial courts judgments for rent, costs, and statutory

attorney fees in favor of Dickinson. We award costs and fees to Albice/Teccas as the prevailing

party. RCW 4.84.010.

We reverse.

Armstrong, J.

We concur:

Penoyar, C.J.

Worswick, J.

Albice v. Premier Mortgage Services of Washington, Inc.

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Transcript of Albice v. Premier Mortgage Services of Washington, Inc.